The Commission on securities and stock exchanges of the USA (SEC) are very cautious in their statements regarding ICO and cryptocurrency, as it tries to maintain a technological revolution and not hinder innovation.
However, companies still have to be resourceful, spending the ICO for American investors with the instrumental «token» (token utility), which provides the functionality of the platform without a guarantee of return on investment, while not attracting the increased attention of regulators.
There are many examples of when companies acted with extreme caution. The most striking of them — the «Simple agreement investors» (SAFT — Simple Agreements for Future Tokens).
Creating SAFT law firm Cooley became the unofficial method of operation in accordance with the regulatory rules that allowed safe to sell tokens through ICO accredited investors and venture capital firms. Improvising on the theme of SAFE (Simple agreements for future equity), SAFT reduced the risk of the sale, because tokens can only be obtained when the actual performance of the network conditions or Protocol. The essence of SAFT was to open the sale to accredited U.S. investors, while maintaining a barrier for the General public.
To date, unanswered is the important question: how the SEC really treats the ICO and cryptocurrencies? To understand the Commission’s position, going back to last year when the SEC issued its first statement regarding the case of DAO.
The case of the DAO – the first statement SEC about cryptocurrency
In the summer of 2017, the SEC published its first public report about the ICO, and is about DAO, the initial placement of tokens which became one of the saddest losses of millions of dollars because of the vulnerability that led to theft and have resulted in the emergence of Ethereum Classic.
Obviously, DAO was offered for sale unregistered securities. Such positioning has provided the company with a failing Howie, who has become a litmus test when it comes to determining whether the proposed sale of a security token or «token instrument».
The importance of this report was that it instilled optimism in the community. SEC could just ban all ICO after this clear violation. Instead, the Commission decided to propose options legal the initial placement of tokens. Investor newsletter, released on the same day of the ICO, provided information about the process of selling tokens and about the relevant clause
regarding coins that could potentially be considered securities:
«Depending on the facts and circumstances of each individual ICO, virtual coins or tokens that are placed or sold, may be securities. If they are securities, listing and selling of these virtual coins or tokens through the ICO are regulated by the Federal securities laws».
This statement was given the opportunity to work quietly to those companies that offer within the ICO «instrumental»tokens. SEC understands the innovation occurring in the space of the blockchain, and realizes that a direct ban could stifle them at an early stage of development. At the same time, the Commission needed to provide investors with information to protect them from investing in fraudulent projects.
Over the next several months, the SEC will begin to develop their own cyber-unit to deal with the ICO offering of unregistered securities. The first trial occurred in August last year, when the founders ICO Protostarr stopped
work in accordance with the requirements of the SEC and returned funds in the amount of 119.6 ETH investors.
Shortly thereafter, the SEC published the first major press release, which spoke of the fraud in new York who is trying to collect money by selling licenzirovanie assets.
Clear violations and the actions the SEC
In September, the SEC exposed
two of the Scam, the author of which was Maxim Zaslavsky and his companies that raised money through fraudulent ICO REcoin Group Foundation DRC and the World. Both companies were focused on tokenization assets and ensure return on investment. The SEC has frozen the assets of Zaslavsky and charged him with violating the laws against fraud and the Federal securities laws.
After that, the next decisive action was taken by SEC in December, when they froze the assets PlexCoin — ICO $ 15 million dollars, which was promised «13-fold profit in less than a month.» This Scam allowed the SEC to create a precedent and demonstrate the results of its cyber division to combat fraudulent ICO.
After the closure of the ICO PlexCoin the largest intervention of SEC industry can be considered the termination
fundraising company Munchee Inc, which wanted to obtain from investors $ 15 million, offering the token used for the purchase and sale of goods and services. The company returned funds to investors and ceased production of tokens.
On the same day the head of the SEC, Jay Clayton (Jay Clayton) issued a statement
in terms of cryptocurrencies, and ICO to help navigate the «ordinary investors» and «market professionals». He urged retail investors to exercise caution when considering projects that «sounds too good to be true» considering the amount of fraudsters operating in the industry. Clayton also recognized the ICO method of raising funds for innovative projects.
Again, the SEC acted prudently, but generally positive.
Clayton and Giancarlo: the creation of effective regulation
Earlier last week, Clayton and George. Christopher Giancarlo (J. Christopher Giancarlo) (the head of the Commission on trade in commodity futures), published an expert opinion in the Wall Street Journal, which can be considered a public statement and a warning for both regulators and cryptocurrency investors. In this article Clayton and Giancarlo convince readers that they understand the impact of technology of the blockchain, but will be strict with those who try to ignore the recommendations of their Commissions.
«Our goal as regulators of the market — to set and enforce rules that promote innovation while enhancing the integrity of the market.»
Part of the article was devoted to conversation about changing the existing rules to ensure appropriate regulation of all cryptocurrency-related areas. While it is clear that the rules will be tough enough, this statement confirms the willingness of regulators to work with the community and to support internal innovation. They understand the importance of space and would like to work with him and not against him. At the same time, their goal is to protect investors from fraud.
Tokens-shares — the future of the cryptocurrency industry?
Taking into account the active position of the SEC in regulating the ICO, in a short time the location of the token, the relevant rules of the Commission, will become commonplace. Even major players such as Kodak, drew attention to the industry proposing its own token share.
In connection with the prosperity of this direction tZERO, a subsidiary of Overstock, has released its token share of ICO through, hoping that this eventually contributes to the creation of the first SEC regulated alternative trading system cryptocurrency (ATS). Providing a trading platform for token-stock, tZERO is likely to open up opportunities for other companies seeking to raise capital through ICO, and allow them to sell the tokens without violating the requirements of SEC.
But do not consider the heyday token of the shares by the end of the instrumental «tokens». Most likely, in the future there will be two parallel markets for the tokens and instrumental «tokens», each of which will service their share of the investors. It is possible that one and the same company will be able to produce tokens of both types and make a profit from each of them.